Ford Motor Co. plans to cut costs by $200 million annually by cutting hundreds of marketing and administrative jobs in Europe as it looks to shore up profit margins in the face of rising regulatory costs in the continent, the company said Wednesday.
The U.S.-based carmaker said it was launching a voluntary redundancy program as it looked to slash costs across all areas of its European business and was taking additional steps to revamp its product lineup to sustain profitability in the region.
The voluntary redundancy program could include options like offering staff early retirement, severance pay and other options, Jim Farley, head of the carmaker's European business, reportedly said in an interview. “We are creating a far more lean and efficient business that can deliver healthy returns and earn future investment,” he added.
The company turned a full-year profit of $259 million in Europe in 2015, the first time since 2011, helped by a 10 percent gain in vehicle sales. The company also said that assembly lines and product development workers would not be affected by the current round of job cuts.
Ford announced it would look to push sales of SUVs in Europe in 2016, setting a target of a 30 percent growth in the segment by the end of the year. The company also forecast an operating margin between 6 percent and 8 percent in the longer term for its Europe business.
Last week, the company posted fourth-quarter earnings that beat Wall Street expectations but warned that profit margins from its North American business in 2016 may not equal the 10.2 percent achieved in 2015.
The company’s stock has lost 17.6 percent of its value since the beginning of the year, over fears of a downturn in the Chinese economy and regulatory costs eating into margins.
"The consensus on Europe is that it is a market where the auto industry has little hope of making any money, as it is beset with overcapacity, very high structural costs, and is populated by too many automakers all offering technically sophisticated and expensive-to-build vehicles," Reuters reported, citing Bernstein analyst Max Warburton.